Tuesday, December 3, 2013

Apple and Nokia propose sanctions against Samsung and its lawyers over Patentgate

On November 8, Magistrate Judge Paul S. Grewal said it appeared to him that "sanctions against Samsung and its attorneys are warranted" and ordered Samsung to explain why there should be none for its lawyers' improper disclosures of highly confidential business information from Apple's patent license agreements with Nokia, Ericsson, Sharp, and Philips. He gave Apple and Nokia the opportunity to propose appropriate sanctions.

As expected, Samsung argues that the disclosures were inadvertent and that no improper use was made of the information obtained. Samsung also points to the fact that Apple's lawyers recently forgot to seal an exhibit to a court filing (in the parties' other California case) that included some confidential Google source code (as ArsTechnica's Ron Amadeo accurately noted, "Android is open--except for all the good parts"). While this does show that such oversights may occur, it's not reasonably comparable to the Patentgate issue involving extremely sensitive business information that can affect, as Nokia wrote in its filing, multi-billion dollar licensing negotiations.

Apple and Nokia do advocate sanctions. Apple and Nokia's proposals have some common elements (for example, they both want Samsung to pick up their costs in connection with this affair), but differ in their priorities. Simply put, Apple is tougher on Samsung while Nokia is tougher on the law firm of Quinn Emanuel (QE):

Apple's most ambitious initiative is its request of a finding that Samsung is no longer entitled to an injunction in the second California litigation between these parties, which is scheduled to go to trial on March 31, 2014 -- or at least it wants the court to hold that Samsung's misconduct weighs against injunctive relief. Injunctions are an equitable remedy, and Apple cites the principle that "[one] who seeks equity must do equity" and says "the Federal Circuit has held that parties cannot seek equitable remedies where they have unclean hands". If the court does consider Samsung's misconduct in the context of injunctive relief, Apple will have a much stronger argument with respect to standard-essential patents (SEPs) than non-SEPs because the improper disclosures were used in a SEP licensing context.

Some of Apple's proposals could be described as "exposure" sanctions: Apple wants public findings of Samsung's misconduct and wants Samsung and its lawyers to be required to inform all parties to their other cases of this matter. Since this is a very high-profile case anyway, chances are that other adversaries of Samsung and QE will hear about such sanctions anyway. Furthermore, Apple wants Samsung and QE to be publicly reprimanded.

Apple is very interested in preventing Samsung's executives from making use of the illegally-obtained information. That obviously makes sense, though it's hard to put the genie back into the bottle. Apple asks the court to "[p[rohibit [Samsung chief licensing executive] Dr. Ahn and other Samsung executives (including those responsible for licensing and/or managing Samsung's litigation with Apple) who improperly obtained Apple's and other companies' confidential business information from negotiating any mobile-device
licenses for Samsung for the next two years". Apple explains that Dr. Ahn and others affected by this prohibition could still negotiate licenses in other industries than mobile devices, and that other Samsung employees could still do so.

Nokia seeks to prevent "Samsung or any of its employees who received the [Confidential Business Information] from using the CBI in any patent licensing negotiation that involves Nokia". This doesn't necessarily mean (though it could mean) that there are still ongoing negotiations. Nokia might also request this with a view to a renewal.

Nokia's most drastic proposal is that QE be barred for 10 years from any representation of clients in matters adverse to Nokia because Nokia can no longer trust QE's appropriate treatment of its confidential information, while Apple merely wants to prevent QE from executing new protective orders regarding confidential Apple material for two years but recognizes that its California cases against Samsung are at an advanced stage, which is why Apple does not request that QE be disqualified fom those litigations.

To me, the 10-year sanction against QE with respect to any matters adverse to Nokia is a bit over the top. The mere fact that another violation of this case would result in truly drastic sanctions against QE should make it acceptable for Nokia to allow QE to do work on Nokia-related issues, though a limited sanction along the lines of Apple's two-year proposal may be appropriate.

A hearing on this will be held next week. Samsung argues that it must be allowed to respond to any request for sanctions, and that procedural demand seems reasonable to me. We'll see if this requires a postponement of the hearing.

For those interested in further detail, here are the parties' submissions on sanctions:

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About Me

Florian Mueller is an app developer who used to be an award-winning intellectual property activist. His 30 years of software industry expertise span different market segments (games, education, productivity and infrastructure software), diverse business models, and technical and commercial areas of responsibility. In recent years, Florian advised a diversity of clients on the patent wars surrounding mobile devices, and on their economic and technical implications. (In order to avoid conflicts of interest, Florian does not hold or initiate transactions in any technology stocks or derivatives thereof, except that he is long AAPL.) He is now developing games for smartphones and tablet computers.